The European Bank for Reconstruction and Development (EBRD) is lending US$87.8mn for the completion of a new transmission line allowing the north of Kazakhstan to transmit its surplus power to the more populated south of the country. This will both aid the development of a Central Asian regional energy market and, by benefiting both populations and businesses based in the south, promote the diversification of Kazakhstan’s economy away from dependence on oil and gas.

The loan to state-owned Kazakhstan Electricity Grid Operating Company (Kegoc) finances the construction of the second and third sections of the new 500kV North-South electricity transmission line over the 865km of the line running between Ekibastuz and YukGres. Two substations will also be expanded.

This deal follows a US$60mn loan agreement signed last year for the first, 270km, of line between YukGres and Shu.

The EBRD is acting as lender of record for the full US$87.8mn. Of this, a total of US$35mn has been syndicated to RZB, Bayerische Landesbank, Calyon and Citibank.

This commercial financing demonstrates Kegoc’s ability to attract international commercial banks for long maturities on the basis of a domestically based security, says EBRD president Jean Lemierre at the signing in Almaty.

The EBRD’s US$52.8mn portion is being lent for 12 years, with commercial banks providing nine-12 year credit.

The Development Bank of Kazakhstan is also lending the equivalent of US$53mn, and the International Bank for Reconstruction and Development (World Bank) has agreed to provide a US$100mn sovereign-guarantee loan for the project.

The financing constitutes an important milestone in Kegoc’s corporate development, in particular in its ability to attract competitive financing from international commercial banks without the benefit of a sovereign guarantee, says Anthony Marsh, director of the EBRD’s power and energy team.